Research Reports

•Registered and paying dealers increased for ATHM in 3Q15 – According to our proprietary data, the registered dealers of ATHM increased to 22.8K in September from 21.7K in August and paying dealers of ATHM increased to 19.0K in September from 18.1K in August (Figure 1). For 3Q15, ATHM had 19.6K unique paying dealers representing Y/Y growth at 34% and Q/Q growth at 5% (Figure 2). In terms of the paying ratio, it steadily went up to 80.4% in 3Q15 compared with 76.3% in 2Q15 (Figure 3). ……

•Promotional events in 3Q15 – Jumei had three major promotions during the September quarter that we believe are the drivers of growth in 3Q15, including: 1) July 7th - 0 RMB for one Jumei Global product promotion (7月7日免费包邮领取一件海外爆款); 2) August 1st - 3.5 years anniversary promotion; and 3) September 21st - mom & baby products promotion (Figure 1). The promotion on August 1st is a big one and serves as a major driver for volume growth in the quarter.……

We believe BIDU almost has no alternatives but to invest in food delivery as well as group-buy business in order to overcome constrains of its past success in PC search, which is that BIDU does not require users to register. In the mobile era, its peers Tencent (700-HK, HK$149.10 – Intraday, Not Rated) captures millions of mobile users with its communications tools, mobile QQ and WeChat, and Alibaba (BABA, $79.71, Buy) with its Alipay while BIDU had nothing to accomplish such task. In the PC era, the internet entry point can be search but in the mobile era, it has become the individual mobile user. We believe that with BIDU’s rich cash position, map, data and its determination, there is a chance that food delivery and group-buy can enable the company to accomplish such goal. Therefore, whi……

BABA will report FY2Q16 results on Tuesday, October 27th before the markets open with a 7:30am EST conference call. Based on our proprietary data, we believe that BABA is likely to report FY2Q16 results better than consensus expectation at 27% Y/Y growth driven by higher commission take rate for Tmall and better advertising revenues from Taobao. For FY3Q16 onward, we believe the company can benefit from Taobao’s recent increase in monetizable search inventories. As the company is working out of its issues, we believe the hardest time is almost behind BABA and it may start to see stable margin and growth. As such, we upgrade the stock from HOLD to BUY with a price target of $84.00.……

SOHU will report 3Q15 results on Monday, October 26th before the markets open with an 8:30am ET conference call. We do not anticipate any surprises to 3Q15 and expect results to be in line with consensus at best. For online video, the business continues to burn cash and we believe SOHU needs a more viable model to become profitable. For the online game business, while the growth of MMO games is decelerating, its mobile games are also lacking new growth drivers. Therefore, we maintain our Hold rating on the stock.……

CYOU will report 3Q15 results on Monday, October 26th before the markets open with a 7am EST conference call. We believe the quarter may be at the best in line with consensus. For the last couple of quarters, CYOU seemed to be making positive progress in mobile games development; however, its newer mobile games are performing lower than expected. For the near term, we believe CYOU may continue to stagnate as it refines its game development. As such, we maintain our Hold rating as CYOU still needs to demonstrate such capability for its sustainable long term growth. ……

We compared 166 SKUs of 30 cosmetic brands that were listed for sale for the past 180 days on both vip.com and jumei.com platforms, and we find that in general JMEI prices are higher than VIPS. The majority of these brands are international brands including Estee Lauder, Elizabeth Arden, Biotherm, SK-II, Clarins, Clinique and many others (Figure 1). ……

On September 29, 2015, the Chinese government announced that it will reduce the auto sales tax on vehicles with engines less than 1.6L from 10% to 5%. The tax cut will be effective immediately until the end of 2016. We believe the tax cut might actively stimulate the sales of new cars in 4Q15 and FY2016, especially for entry-level models from lower end brands. As such, we believe vendors such as Shanghai GM, Shanghai VW, FAW VW and Changan Ford may benefit from such tax cut policy.……

•Online e-commerce projects accelerated – The number of e-commerce projects for SFUN increased to 2,296 in August, significantly higher than 1,482 in 2Q15 and 1,528 in 2Q14 (Figure 1). SFUN’s coverage of cities remained stable at 25 and the company continues to focus on Tier 1 and Tier 2 cities, with 25.7% and 72.3% of the projects in the respective tiers. ……

•Strong momentum in mobile game downloads -. As of 3Q15, the cumulative number of downloads of NTES's major mobile games was 313M, up significantly from 161M at the end of 2Q15 with a net add of 152M (Figure 1) The growth continues to be mainly driven by LDXY (melee West) at 98M and FWWJ (Fantasy Westward Journey hand tour) at 33M while DXHY was only at 6M. ……

•Significant increase in course utilization rate – According to our proprietary data, for FY1Q16, the total number of courses offered only increased 21.6% to 84.0K from 69.1K in FY1Q15 (Figure 1), and the course utilization rate (defined as the number of fully registered and opened courses as a % of total courses offered) improved to 62.1% from 35.2% in FY1Q15 (Figure 1) with the number of fully registered and opened courses increased 27.9K or 114.8% Y/Y to 52.2K in FY1Q16 from 24.3K in FY1Q15 (Figure 2). While course utilization rates improved for all subjects in this quarter, K-12 contributed the most. Among the 27.9K increase of fully registered and opened courses, K-12 contributed about 20.1K or 72% (Figure 2).……

•International app download rankings declined in August and 3Q15 – For 3Q15, the Clean Master Google Play average ranking declined to #38 from #16 in 2Q15 (Figure 1). The average ranking for CM Security declined to #64 in 3Q15 from #37 in 2Q15 (Figure 2). In terms of Battery Doctor, the average ranking declined from #91 in 2Q15 to #112 in 3Q15 (Figure 3). For the month of August, Clean Master average ranking declined to #40 from #36 in July, CM Security declined to #65.7 from #66.4 in July and Battery Doctor declined to #125 from #95 in July.……

•No large scale promotional activities in 3Q15 - During 3Q15, VIPS did not have any large scale promotional activities, which is the new normal going forward Instead, the company had several small promotions during the quarter, such as: 1) July 9th home products. ; 2) August 25th global products; 3) September 18th IN (fashion brands); 4) August 21st beauty products; 5) September 17th home products, among others (Figure 1).……

On September 20, 2015, XRS announced that it has entered into a definitive agreement to acquire Firstleap Education, from which we believe XRS may benefit financially mainly on the topline. Based on Firstleap’s past year performance, we believe it may make about $5M - $8M in FY3Q16, and play a role in offsetting two negative factors in this quarter: 1) school closure in Beijing during the parade vacation from Sept. 3rd to Sept. 5th; and 2) depreciation of Chinese currency at around 4%-5%. In the near term, for its FY2Q16, based on our proprietary data, both the number of courses and enrollments for summer courses in FY2Q16 showed strong growth. While we remain positive on the revenue outlook of the company driven by the expansion and acquisition, we believe margin may not grow as fast as r……

JMEI will report 2Q15 results on Wednesday, August 19th after the close of the market with a conference call the following morning at 8am EST. The company is likely to report 2Q15 results much better than consensus due to multiple promotions as well as its Jumei Global sales in 2Q15. In terms of 3Q15 guidance, we also expect JMEI to guide revenue better than consensus on continued strong momentum. We maintain our Buy rating and PT of $30.00.……

YOKU will report 2Q15 results after the U.S. markets close on August 20, 2015 with a 9:00pm ET conference call. We believe the company may report 2Q15 results at least in line or better than consensus expectation driven by the increasing number of advertisers. In addition to fundamentals, YOKU may benefit from potential market consolidation. We believe 2015 can be a consolidation year in China, particularly for the industry that is burning cash due to fierce competition. China’s online video market has been burning cash for years and we believe it is the time for consolidation as it can be the only solution for the healthy development of this industry. Therefore, we upgrade our rating on the stock to BUY from HOLD with a price target at $33.00. ……

SINA will report 2Q15 results on Tuesday, August 18th after the market closes followed by a 10:10pm EST earnings call. We are expecting at least in line 2Q15 results driven by potential solid results from its core business Weibo (WB, $13.60, Buy). For most of the past year, the company has worked continuously on its business transition to more vertical oriented sites. We believe that several of its key focus areas have significant growth potentials. Therefore, we upgrade SINA from Hold to BUY with a price target of $62.00. ……

WB will report 2Q15 results on Tuesday, August 18th after the close of the markets followed by a 9pm EST conference call. We are expecting a solid 2Q15 driven by the company’s ongoing monetization efforts as well as new initiatives and projects to foster higher engagement levels between users and advertisers. For 3Q15, we believe guidance may be in line with consensus. Longer term-wise, we believe Weibo is well positioned for growth with its vertical channels, particularly the Movie Channel as it offers users a one-stop shop type of service – users have the ability to research movie reviews/comments and when they are ready, they can make movie ticket transactions. We maintain our BUY rating but lower our price target to $16.00 from $24.00 based on our new estimates.……